Wednesday, December 28, 2011

We have had a very good year, capped off by a strong December. For a while, the year was driven by CCG sales, to the point of alarm. Sure, we want many happy CCG customers, and we've done a lot in the last year to accommodate that growing crowd, but the card shop mentality is a cautionary tale. There is a cynicism that develops with the casino like quality of the product and events. The worst part of that cynicism is how CCGs tend to crowd out other games. Those dollar signs in your eyes can blind you to the roots of the community, the guys who will still be coming in long after CCG burn out has taken hold.

So I was happy when I ran the numbers and realized that our success in 2011 wasn't entirely due to CCGs. Sure, CCG sales were almost double from last year, thanks to strong Magic, Yugioh and even Pokemon releases. Konami especially seems to be on a new strategy of releasing things that don't suck. Good for them.

The closing of our competition in the CCG arena turns out to have had very little to do with this success, by the way, knowing the kinds of numbers they were pulling in. The goal there has been to comfortably integrate our more aggressive new players into our more pastoral casual CCG community. I believe that has gone well. Our Magic community has grown tremendously and I know they'll benefit the most when we add more space (which I'll discuss later).

In the case of Yugioh, it has been about increasing the flogging until morale improves, literally adding security until behavior changed. The latest round is from the airport security playbook, with no bags or backpacks allowed in the Game Center. This resulted in our volunteers quitting in protest and our first "tournament organizer" employee at the store. Having someone paid to run events is pricey, but by removing the usual organizer incentive of card trading (which the no bag rule hinders), events run much smoother. Things are much improved and player theft has been reduced.

So how did we do in other departments? Such sedate departments like RPGs were up 25%. It was the year of Pathfinder, with sales outstripping Dungeons & Dragons two to one. Around March, they were equal, but the writing was on the wall as I explained in my Inflection Point blog post, one of my most popular posts of the year. We had a tremendous number of people starting Pathfinder in 2011 and a clear perception that D&D was in that twilight period with a new edition on the horizon. Monte Cook, of Third Edition D&D fame, has moved across the country to work for Wizards of the Coast again on a big project. I wonder what it is? For the future, I neither expect Pathfinder to rocket this high in subsequent years nor D&D to suck quite so much. Instability makes retailers nervous and RPGs are definitely in a variety of transitions.

Miniature games were looking to drag us down by the end of Summer, but they ended higher ever so slightly. 40K had a slow release year. Fantasy had some bombs from a sales perspective. Ogres did poorly (we had rulebooks on clearance) and our Fantasy customers complained about supplements they neither asked for, nor wanted. Games Workshop remains that space alien that nobody can figure out. There's just too much money in that company for them to make decisions that make sense to mere mortals. Malifaux grew steadily, despite a pruning of the stock. However, it was Warmachine that knocked it out of the park and kept the miniatures strong.

This was due to a couple factors. First, Privateer Press got their act together and declared a "core" list for us to pursue and then actually provided the product. The core list allowed us to have faith in the core, meaning we were likely to have success if we always stocked those items. It required that we hunt core stock down wherever we could find them and it gave our customers the confidence that we would have a reasonable stock level. In the past, what we had in stock was based on metrics of what sold, which was entirely about the ten people who were playing in a static community. Occasionally, entire armies were just not there, because "nobody played them." That period is over.

The other big factor is better support. We have two employees on staff who play the game and know it well, Brendan and Charlotte. We have customers who come in asking for a particular employee when they have questions: Michael for RPGs, and now Brendan for Warmachine. I'm alright with that and I love having expertise on staff. That product knowledge has helped sales tremendously. The other factor is our new Warmachine night on Wednesdays, now that our old organizer Dave is back from Iraq. He does a good job of bringing in new people, with our Sunday morning group being a more casual experience for veteran gamers.

Board games, in which we couldn't point to a clear holiday winner, were even up 9%. Despite deck building game fatigue, that growing segment led to strong sales. Almost all our growth in board and card games in 2011 was in card games. Most of the exciting board games for 2011 seem to have come out in December, and hopefully won't be overlooked in 2012. Our board game night continues to be run professionally by our volunteer Joe. It has been moved to Monday nights due to overwhelming growth of Pathfinder Society on Tuesdays. Joe is a great organizer and has encyclopedic knowledge of board games, especially classics. He's our go-to guy with our board game questions.

What else? Miniatures turned around after I declared a "core" selection of Reaper models based on their best seller list. I took the Warmachine approach and basically said if this doesn't work, we're done with it. It worked with sales up 27%. Again, we hunt down that core product wherever it may be.

Miniature cases were up 36% due to the popularity of Battlefoam. Yes, it's expensive, but it's top quality and the supply is steady. We're now done with Sabol except for trays. We sold our last bag this month, a bag that used to sell four times a year that hadn't sold in 18 months. Battelfoam is just better. Nobody really buys Games Workshop cases anymore and GW knows it. Technology has moved on.

Finally, did we make enough money during the last quarter to expand our game space? Time will tell. It seems we got a large chunk of it, but it will depend on sales between now and the end of January. From a business perspective, the end of December is about reducing taxable income, so we pay off every bill in sight to make the money go away. The real profit is taken at the end of January when the smoke clears. What we have on February 1st is what we made during the previous year.

I'm optimistic, both about expansion and about 2012. At the macro level, there was concern that strong holidays sales were a result of consumer indebtedness, but now reports are in that people spent money they had or they used credit cards they tend to pay off each cycle. The fear was strong holiday sales using debt would result in a hangover in Q1 as consumers slowed spending to pay that off. That doesn't appear to be the case, as it was in 2011, when January sales tanked after a so-so December.

We've also got new events driving revenue, such as our Star City Games Invitational on January 7th, and general excitement about the next Yugioh and Pokemon sets. We'll learn if Magic will continue it's winning streak in a week or two when some of the spoilers for the next set come out. Meanwhile, we'll work to improve our events, dial in exactly what you guys want, and hopefully get closer to our big expansion goals.

Finally, it took seven years to get to this point. Our limited success is based on a very idiosyncratic set of circumstances, including staff, extremely local customer base, money from trees that are extinct, and the whims of the industry to provide product. Our return on investment (ROI) is something like 15-20 years. I mention this because I know we have competitors planning to pop up in 2012. I have no desire for a second store (it's a recurring nightmare actually), but if I did, I have several good locations in mind. Talk to me before opening a new store and I'll gladly name them for you. Maybe it will make the nightmares go away.

Friday, December 9, 2011

Amazon existed before I had a store, so it was part of the eco-system when I entered the retail gene pool. I accept this. Sure, they've wasted a billion dollars of investor money to become profitable, taking a decade to do it, but hey, that's their business. And sure, they desire to evade sales tax and deprive states of much needed revenue to fund schools and public services, but hey, that's really a battle between them and other big online retailers and it's likely going to take a government solution. I've weighed in on that, but it's not really about me. However, this week they've gone a bit too far.

This article talks about how Amazon is encouraging customers to visit stores, scan items, walk out and buy online from them. Now that's just plain wrong. Here's something I learned when I was younger. When you enter a business and engage a sales person, you have entered into a social contract where it is expected that both of you are acting in good faith. The sales person honestly and factually attempts to assist you, while you have intention to actually buy. It's alright if you're "shopping around," or not ready to buy, but the intent should be that the sales person has a chance at some time in the future.

The assumption is that you're not wasting their time, stealing from them. It has always been this way. I had this explained to me by a car salesman who I had wronged, not giving him a chance to even negotiate on a car that he had spend time with me looking at. It took some giant brass balls for him to tell me this, but I credit him. I bought the car from someone else on a whim and had brought it to his service department. I was oblivious to these kinds of social constructs and I was in the wrong. It's what happens when you're focused entirely on the price of things and are oblivious to things in life with actual value, you know, like people and communities. It's a pitfall of being from an online generation.

Other things you notice as a store owner. People will walk into a store and not say hello to the person there, or if they do, they see that friendly hello from the store employee as a cynical ploy (thanks Wal-Mart). People assume assistance from sales people is likewise a cynical job requirement of the employee. My usual question: Are you finding everything alright? The usual answer: an instant, pre-programmed yes, followed by, well no, I'm looking for.... We're losing our way as a society when basic social constructs like this break down, when a "hello" becomes a loaded threat.

So this is what Amazon wants you to do. They want you to walk into a store, waste the time of the employees of that store, crap all over the social contract, use the store to research your wants with no intention of buying from the store, and then shop at Amazon. It's a scummy thing to do. It's wrong, immoral, and hopefully you can see where a store owner would be outraged at this. It's not enough for Amazon to systematically gut various brick and mortar industries with the help of Wall Street, in an incredibly inefficient manner, moving on to the next trade after they've sucked out the marrow from their victims. They want more. They want to draft you into their war on local communities, on local people. Do me a favor. Don't be that guy. If you're going to shop Amazon, shop Amazon. Just leave the brick and mortar stores alone.